Infrastructure Investment Trusts, commonly known as InVITs, have emerged as an attractive investment option in the Indian financial market. InVITs are similar to Real Estate Investment Trusts (REITs), but instead of investing in real estate, they invest in infrastructure assets.
Let’s understand in detail about InVITs
What are InVITs?
InVITs are investment vehicles that pool money from investors and invest it in income-generating infrastructure assets, such as roads, bridges, power plants, and airports. The primary objective of InVITs is to generate income through the rental and toll income from these assets. InVITs are managed by an asset management company (AMC) that oversees the operations of the trust and distributes the income to the investors.
How does it work?
InVITs work on the same principle as REITs. The trust acquires infrastructure assets from the sponsor or the developer, who may be a government entity or a private company. The AMC manages the assets, collects the rent or toll, and distributes the income to the investors in the form of dividends. The dividends are tax-free in the hands of the investors, making it a lucrative investment option.
Return you can get in India InVITs offer attractive returns to the investors, which is the primary reason for its popularity. The returns are generated from the rental and toll income from the infrastructure assets.
The returns are typically higher than other fixed-income instruments such as bank deposits or bonds. The returns from InVITs in India range from 8% to 10%, depending on the assets and the management of the trust.
Things to look at before investing in InVITs While InVITs offer attractive returns, investors should consider the following factors before investing:
Asset quality: The quality of the infrastructure assets is critical in determining the returns from InVITs. Investors should look at the age, location, and condition of the assets before investing.
Sponsor credibility: The credibility of the sponsor is essential in ensuring the quality of the assets and the management of the trust. Investors should look at the track record of the sponsor and their financial strength.
Management quality:The management of the AMC is critical in ensuring the smooth operations of the trust and the distribution of income to the investors. Investors should look at the experience and expertise of the management team.
Fees and expenses: InVITs charge fees and expenses to the investors for managing the trust. Investors should look at the fees and expenses charged by the AMC and the impact on the returns.
Conclusion
InVITs offer attractive returns to the investors and provide exposure to income-generating infrastructure assets. However, investors should consider the quality of the assets, sponsor credibility, management quality, and fees and expenses before investing in InVITs. InVITs are a relatively new investment option in India, and investors should do their due diligence before investing.
Anushka Trivedi is a freelance financial content writer. She can be reached at anushkatrivedi.com
